Marine Resources

Madalena Barbosa Marine Resources – April, 2012 Index Common Property Fishery of N identical fishing vessels model: †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 2 1. a) Biological Stock Equilibrium without Harvest †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 2 1. b) Maximum Sustainable Yield †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 2 1. c) Open Access Equilibrium †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 5 1. ) Optimal Economic Equilib rium †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ 6 1. e) Comparison between Maximum Sustainable Equilibrium and both Open Access Equilibrium and Optimal Economic Equilibrium †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 8 1. f) Assuming a schooling fishery †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 9 2. Different possible policies †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 11 2. ) Total Allowable Catches †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ 11 2. b) Effort and harvest taxes †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ 13 2. c) Individual Transferable Quotas – ITQ’s †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 15 3. Recommendation statement for the policy decision ITQ’s †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 16 Figure 1Growth and Harvest as function of stock size †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ Figure 2Sustainable revenue, total costs and net benefit of fishing effort. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ 8 Figure 3 Growth and Harvest as function of stock size for an Open Access equilibrium and a set TAC †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 11 Figure 4 Sustainable revenue, total costs and Total revenue and total costs for the TAC level of fishing effort. †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 2 Figure 5 Use of corrective taxes on effort can equate social and private costs †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 14 Figure 6 Use of corrective taxes on harvest that can equate social and private revenues. †¦Ã¢â‚¬ ¦. 15 Marine Resource Management – Assignment 2 1 Common Property Fishery of N identical fishing vessels model: Biological growth function for the resource stock: ? = 1? ? = ? ? Graham-Schaefer production function (linear case of the Coob-Douglas production function): Profit function: Condition: Where, 0? = ? ? ? S(t): stock (biomass) of economically valuable fish at time t.E(t): Effort is an index measure of the quantity of inputs applied to the task of fishing at time t. Intrinsic growth rate of the resources stock: r = 0,8/Ye ar Natural carrying Capacity (maximum value for S): k=50. 000 tons Catchability coefficient: q = 0,0002/hour fishing Price per unit of output: p = 200â‚ ¬/ton Cost per unit of effort: c=400â‚ ¬/ hour fishing Maximum Effort per vessel: = 100 hours fishing 1. a) Biological Stock Equilibrium without Harvest In this situation the growth in the stocks doesn’t exist so that: ? =0 = = 50. 000 1. b) Maximum Sustainable YieldIn order to calculate the values that maximize sustainable harvest for this fishery, we need to compute the harvesting function that depends on effort (Shaefer Yield Effort Curve); and after that, to maximize harvesting for effort so that we are able to compute the different sustainable values. Marine Resource Management – Assignment 2 2 First we substitute the Graham-Shaefer production function into the biological growth function of the stock and obtained, = 1? ? In a steady-state equilibrium = = are equally counterbalanced by the removals from the s tock through harvesting). Also and .The solution of the previous function for the steady-state level of S is: 1? = ? 1? = ? = 0, so that = (the additions to the resource stock 1? = = ? ? 1? = ? Substitute the former function in Graham-Schaefer production function to find Shaefer Yield Effort Curve: ? = = = ? 1? ? ? ? Schaefer Yield Effort Curve: This equation is quadratic in E so for high levels of effort the yield is zero. So, if the effort level is higher than the critical level, > towards extinction. ? , the yield is zero and the population will be driven Maximize Shaefer Yield Effort Curve to find the highest value of Effort that can be sustainable, 2 =0? 2 =0? = ? = = 2 ? ? = 2 Marine Resource Management – Assignment 2 3 To find the Maximum Sustainable Harvest level substitute Emsy in the Shaefer Yield Effort Curve, ? = ? ? 4 ? ?= 2 ? 2 ? ?= ?= 2 2 ? 4 ? ? ?= 2 ? = 4 ? To find the stock that maximizes sustainable harvest of this fishery substitute Emsy and Hmsy in Gr aham-Shaefer production function and solve it for S, = ? 4 = 2 ? 4 Note that the resource stocks at MSY is on-half of the natural carrying capacity. The solution for the maximum sustainable yield is given by the following values of Effort, harvest and stock: = 2 ? = 0,8 ? 50. 000 ? 4 50. 000 = ? 2 0,8 ? 0,0002 = . 0 2 = ? = = = 2 4 ? ? = = = . . Now that we have calculated the level of effort corresponding to the maximum sustainable yield, EMSY, we can estimate the necessary equilibrium fleet, as it is the one that with the maximum effort per vessel, EMAX, equals the EMSY. = 2. 000 ? 100 ? ? = ? The equilibrium fleet under sustainable harvesting is composed of 20 identical fishing vessels. ? = = Marine Resource Management – Assignment 2 4 1. c) Open Access Equilibrium To characterize the Open-Access Equilibrium we take two main assumptions: 1. The steady-state equilibrium for the biological growth function is true and 2.It is also true the steady-state equilibrium condition f or all sustainable rents. = =0 ? =0 With these two equations we have the property right condition of open-access and the social welfare optimum. That is, the comparative statics to compare the optimal open-access levels of effort, resource stock, yield, and rents with the social optimum levels of effort, resource stock, yield, and rents. Rearranging we obtain the open-access equilibrium level for the resource stock, ? = = ? ? From the steady-state equilibrium condition we can find the level of effort in an Open Access equilibrium, = ? 1? = = = ? =Rearranging for E: Substituting S for SOA: = 1? 1? ? ? ? Substituting EOA in Graham-Schaefer production function we get the harvest in an Open Access equilibrium, = ? = ? = ? ? 1? ? Marine Resource Management – Assignment 2 5 The profits per vessel on an Open Access equilibrium are as we already stated before equal to zero, = = ? = 200 ? 6. 400 ? 400 ? 3. 200 ? Profit will be zero for each individual firm and, consequently, for all the firms competing in this market; which makes sense once we are in the situation where companies can freely enter or exiting the market (similar to perfect competition).The solution for the Open-Access equilibrium is given by the following values of Effort, harvest and stock: = = ? = ? = ? . = 1? 1? ? ? = = , , ? , ? , ? , 1? 1? ? , ? , ? . ? ?. . = . = . 1. d) Optimal Economic Equilibrium The static, steady-state optimal economic level of effort, for the individual, that also maximizes the social welfare for society is found by computing the equation for sustainable rents and maximizing it for the Effort: = =0? = = ? ?2 ? ? =0? ? Maximizing, 2 ? ? =To solve for the static steady-state optimal economic level of the resource stock, SEFF, substitute EEFF into the equation for the resource stock with the Schaefer Yield Effort Curve, = 1? ? = 1? 2 = + 1? ? = 1 1? + 2 2 ? Marine Resource Management – Assignment 2 6 The Optimal Economic Equilibrium’s for Harvesting can be found using the Graham-Schaefer production function by substituting EEff and SEFF found before, = ? 2 ? = 1? ? ? ? 2 + 2 ? = ? + The solution for the Open-Access equilibrium is given by the following values of Effort, harvest and stock: = 1? ? ? = ? , = + = ? ? = ? , . + 1? ? ? , ? , ? . = = . = . . Marine Resource Management – Assignment 2 7 1. e)Comparison between Maximum Sustainable Equilibrium and both Open Access Equilibrium and Optimal Economic Equilibrium In this question we are asked to compare the maximum social sustainable solutions with both solutions of the Open Access and the Optimal Economic Equilibrium, respectively. The results acquired during the former exercises are summarized in figure 1 and figure 2: 14. 000 q. E(MSY). S 12. 000 q. E(OA). S H(MSY) 10. 000 Growth in Fish Stock (tons) . E(Eff). S H(Eff) 8. 000 H(OA) 6. 000 4. 000 2. 000 S(OA) 0 0 5. 000 10. 000 15. 000 20. 000 25. 000 30. 000 Fish Stock (tons) 35. 000 40. 000 45. 000 50. 000 S(MSY) S(Eff) G (S) q. E(OA). S Figure 1Growth and Harvest as function of stock size 2. 500. 000 E(Eff) E(MSY) E(OA) Total Revenue, Total Cost and Profit (â‚ ¬/hour fishing) 2. 000. 000 1. 500. 000 1. 000. 000 500. 000 0 0 500 1. 000 1. 500 2. 000 Effort (hour fishing) TR TC NB TC (Eff) 2. 500 3. 000 3. 500 4. 000 Figure 2Sustainable revenue, total costs and net benefit of fishing effort.From the previous figures we can easily see that, < < The MSY policy target is the best in a social point of view. It has the highest harvest maximum for a balanced level of stock with a medium level of effort. But in an economical point of view this equilibrium doesn’t bring the best results since its rent level is lower than for the optimal economic equilibrium. The efficient solution is the one that requires less effort to capture an intermediate level of fish, keeping the highest possible level of stock.This is why, economically, efficiency is the best solution, because it will allow future gene rations to capture similar quantities once preservation of stock is taken into account and additionally getting the higher rent. Furthermore and comparing with open access and sustainable yield, this solution requires less effort which is positive for the companies involved. In the situation of open access, as there is free access to the market, competition will lead to low individual harvesting levels and significantly high levels of effort and, at the same time, the level of stocks will be the lowest. < < < < ; 1. f) Assuming a schooling fishery Given that we are now in the situation of a schooling fishery, where the group of fishes is swimming in the same direction in a coordinated manner, and we have the following access given its profit condition ( = ? ? = 200. = = conditions: ? = and 0 ? ? , we are able to compute the outcome for open ), where we already know that ? ? = ? ? = 0.It is again important to note that i) In this case, as ? =2 ? = 200 ? 2 ? 400 = 0 betwe en exploiting or not the stock available. = 0 under all values of effort, we have a situation of indifference Marine Resource Management – Assignment 2 ii) Here, as abandon this market and no effort will be given ( = 0). The stock will not be exploited at all and initial stock will remain equal to final stock. iii) ? =3 ? = 200 ? 3 ? 400 = 200 ? =1 ? = 200 ? 1 ? 400 = ? 200 < 0, firms will not have any interest in fishing so they will simply Under this situation, as market, so they will apply all the effort available in order to maximize their own profits. As a result, stocks will be exploited until the end. > 0, companies have interest in competing in this Marine Resource Management – Assignment 2 10 2. Different possible policiesThe Food and Agriculture Organization of the United Nations (FAO) distinguishes two types of fisheries management: Incentive Blocking and Incentive Management. Regarding Incentive Blocking we can have management instruments that encoura ge effort and and harvest reductions by blocking them. For example, Total Allowable Catches (TACs), gear restrictions, like engine power limitations, limit fishing seasons, limit entry with buy-back schemes (licenses) or just increase the real cost of harvest through regulations. Incentive Adjusting pursuits to adjust the fisher incentives to make them compatible with society’s goals.In this case we are talking about taxes on effort or harvest and quotas. We will present you with some examples regarding these types of management. 2. a) Total Allowable Catches A Total Allowable Catch is a catch limit set for a particular fishery, generally for a year or a fishing season. In a derby fishery, the governments set a limit on the total allowable catch (TAC) for the year and the fishery is open on a specific date. As soon as TAC is reached, the fishery is closed for the year. The TAC is set below the overfishing level to assure that it is restrictive. Its goal is to allow the natura l resource to recover the stock levels.In this case the TAC was set below de level of harvesting for the Open-Access equilibrium at the value of 3500 tons (figure 3). 12. 000 10. 000 Growth in Fish Stock (tons) 8. 000 6. 000 4. 000 2. 000 0 0 5. 000 10. 000 15. 000 20. 000 25. 000 Fish Stock (tons) G(S) TAC q. E(TAC). S q. E(OA). S H(OA) 30. 000 35. 000 40. 000 45. 000 50. 000 Figure 3 Growth and Harvest as function of stock size for an Open Access equilibrium and a set TAC The TAC policy level of effort is significantly lower than the open access level. The TAC level equals Shaefer effort Yield curve in equilibrium, Solving for E: 3500 = 0,0002 ? 0. 000 ? = = ? , = ? ? ? ? , , ? ? ? . So this measure would allow the stock to recover for a level of, = , = 3500 ? 0,0002 ? 387,55 In a conservation point of view this is an effective measure, but in an economical point of view it has its issues. The tendency for fishing enterprises is to move towards an over-investment in equipment and labor in order to increase their share of the common TAC. It causes a major disruption in the seasonal pattern of a fishery as fishermen rush to obtain their share of the quota. Often vessels increase in size and add engine power both to operate with greater fishing power.In a consequence, economic conditions in the derby fishery are best at the start of a season when the fish stocks are most abundant, and steadily deteriorate as harvesting depletes the available stocks. These conditions induce a race for fish, which, in turn, results in overcapitalization (Figure 4). 2. 100. 000 Total Revenue, Total Cost and TAC level (â‚ ¬/hour fishing) 1. 600. 000 1. 100. 000 600. 000 100. 000 0 500 1. 000 1. 500 2. 000 2. 500 3. 000 3. 500 4. 000 -400. 000 TR Effort (hour fishing) TC p*TAC TC' E(OA) Figure 4 Sustainable revenue, total costs and Total revenue and total costs for the TAC level of fishing effort.Assuming that calculate the costs of overcapitalization, c’, and understand t his behavior: = ? ? = ? = 0 and that the stock levels will vary with the imposition of the TAC we can ?= ? = = , ? = , = From the function above we can understand the volatility of this policy. With the increase in the levels of stock the price will be higher and the fishermen have the incentive to invest in fleet capital that from society’s point of view is redundant. Also, the excess fleet makes the monitoring of harvesting very difficult and the TAC limit is exceeded. 2. b) Effort and harvest taxesFish is economically overexploited under open-access regime. The market price is high enough and the harvest cost low enough to make it a commercial resource. Corrective taxes can in theory bring marginal private costs into alignment with marginal social costs. Using taxes the managers reduce the fishermen revenues or raise the real cost of fishing. The idea is to find the tax rate, on either effort or harvest, that adjusts effort to the maximum economic yield level, EEff, that s hould be as said before the level at which the sustainable rent is maximum. With an effort tax the total cost per unit of effort is, = +Where tE is the tax per unit effort (ex. : $ per trawl hour or trawl year) and TC’ is the total costs with taxes. The effect of the effort tax is to increase total costs to such a level that the TC’ curve intersects the total revenue curve for the EEff, as you can see in figure 5. The tax on the effort was found as followed, = + ? ? tE = 800 â‚ ¬/hour fishing ? 200 ? 9. 600 = 400 + ? 1. 600 ? Note that for any value of effort the total costs with taxes is greater that the total costs. The effect of an effort tax increases the slope of the total cost curve for the industry.This implies that the total revenue, TR(E), is shared between the government, as the tax collector, and the Marine Resource Management – Assignment 2 13 fishing industry. The former receives the resource rent, ? Eff, and the fishers end up with the differenc e between the total revenue and the resource rent that is just enough to cover the costs of the fishers. 2. 500. 000 E(Eff) E(MSY) E(OA) Total Revenue and Total Cost (â‚ ¬/hour fishing) 2. 000. 000 1. 500. 000 ? (Eff) 1. 000. 000 500. 000 0 0 500 1. 000 1. 500 2. 000 Effort (hour fishing) TR TC TC' 2. 500 3. 000 3. 500 4. 000Figure 5 Use of corrective taxes on effort can equate social and private costs In the case of a harvest tax, the sustainable revenue of the fishery curve is affected, as you can see in figure 6. The harvest tax would be applied to the price as it is demonstrated next, ? = ? = ? tH = 133,33 â‚ ¬/hour fishing 200 + ? 9600 = 400 ? 1. 600 ? So in this case, the net price of the fish received by the fishers is also only just enough to support the costs. 2. 500. 000 E(Eff) E(MSY) E(OA) Total Revenue, Total Cost and Rent (â‚ ¬/hour fishing) 2. 000. 000 1. 500. 000 ? (Eff) 1. 000. 000 500. 000 0 0 500 1. 000 1. 00 2. 000 Effort (hour fishing) TR TC TR' 2. 500 3 . 000 3. 500 4. 000 Figure 6 Use of corrective taxes on harvest that can equate social and private revenues. The resource rent equals the total tax revenue in both cases, = = ? ? = 133,33 ? 9. 600 = 1. 280. 000â‚ ¬ = 800 ? 1. 600 = 1. 280. 000â‚ ¬ ? ? ? ? Thus, a tax on harvest contributes to decreasing the total revenue of the industry whereas a tax on effort contributes to increasing the industry costs. This would be a very interesting measure if the resource rent would be re-distributed, for example, to the fishing community avoiding any efficiency loss.But it is very hard to get to an agreement regarding this subject so the losses are real and the measure is not efficient in an economic perspective. Also, in a social point of view this measure is very demanding since it lowers the private revenues of the fishers, a theoretical and overall poor social group. 2. c) Individual Transferable Quotas – ITQ’s The ITQ’s are an improved version of the TACâ€℠¢s policy. It allocates a specific quota to each individual (ex. : a vessel, a corporation, etc. ) consistent with property rights theory. With this kind of policy fishermen don’t need to race against each other.We will proceed with short run rights, where fishermen own a share of harvest. The quota is computed from the previous established level for TAC and the fleet capacity, in this case we are going to use the value for the necessary equilibrium fleet previously calculated, ? = 3. 500? 20 = So, each of the 20 identical fishing vessels are allowed to harvest 176 tons per fishing season. To ensure that the expected results are lasting, the quotas should be transferable. There has to be a quota market to ensure that at any time the most cost-effective fisher does the fishing. If = 0, ? As St varies l will be adjusted and the quota market prices established. In a successful Optimal Economic managed fishery, resource rent per unit of effort would be: = ? 1. 280. 000 = 800â‚ ¬ 1.600 And the resource rent per unit of harvest would be: = ? ? These two prices indicate the equilibrium prices of effort and harvest quotas. The quotas market correct incentives for each boat to maximize its rent and to harvest with minimum costs, removing the incentives to over capitalization. So, in a conservation point of view and in economic terms ITQ’s are the best policy measure. . 280. 000 = 133,3â‚ ¬ 9. 600 ? 3. Recommendation statement for the policy decision ITQ’s ITQ’s are the best option as they are efficient both in a conservation point of view as in economic terms. Also, it’s the only measure that aligns the interests of the fishermen, the biologists and the governments. ITQ’s has several advantages like being efficient, as said before, it improves safety, as fishermen don’t need to rush to sea under bad weather conditions, improves the quality for consumer by spreading the fishing season and it incentives for mutual en forcement control.But all of its potential can be wasted if a good monitoring system is not assured. Comparing to a blocking measure, like TAC, its property rights condition correct what it was flawed with the previous policy. Now the fishermen have exclusive rights to a fishery resource, not having to expend effort until profits are zero and, consequently dissipating all the potential rents that the fishery resource could have generated. Marine Resource Management – Assignment 2